NAO reveals departments’ concerns over impact of council cuts

Report highlights warnings of a ‘crisis-driven’ approach of local authorities increasingly focus on providing core statutory social services

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Public spending watchdog the National Audit Office has accused Whitehall of lacking a comprehensive understanding of the way eight years of funding cuts have affected the range of services that England’s largest local authorities are responsible for delivering.

A report on oversight of the sector found continued increases in demand for social care and tightening resources are “pushing local government towards a narrow remit centred on social care” at the expense of other services in the wake of a 49.1% real-terms reduction in government funding since 2010-11.

The NAO said that while the Ministry of Housing, Communities and Local Government – which has oversight for the work of councils – met regularly with the Department of Health and Social Care and the Department for Education to assess individual councils at risk of failing to fulfil their social service duties, there was less focus on other ministerial remits.

According to the watchdog, MHCLG’s focus on adults and children’s social care – and on attempting to ensure funding for those services are relatively protected – risks neglecting its broader remit, which includes ensuring that adequate funding is provided for locally-delivered services overseen some 13 departments. “There is no single view of how funding cuts are impacting the whole of local authority services,” it cautioned.

The NAO report said the Home Office, the Department for Transport, the Department for Business, Energy and Industrial Strategy, the Department for Environment, Food and Rural Affairs had all expressed concerns over the impact of spending cuts on local services which are part of their remit.

The Home Office has expressed concern about councils’ capacity to meet targets for registering deaths; BEIS is worried about consumer and product safety functions delivered by local trading standard services; DfT is concerned about councils' ability to develop business cases to bid for project funding, and to deliver highways maintenance. Defra’s concerns were more general.

“There is no single central understanding of service delivery as a whole or of the interactions between service areas,” the NAO said.

“To date, the current spending review period has been characterised by one-off and short-term funding fixes. Where these fixes come with restrictions and conditions, this poses a risk of slowly centralising decision-making.

It said departments needed to “build a consensus about the role and significance of local government as a whole in the context of the current funding climate”, rather than engaging with authorities solely to deliver their individual service responsibilities, adding that MHCLG needed to take a lead.

It called on the department to strengthen its processes for assessing local authority funding requirements at future spending reviews, and work with its Whitehall counterparts to develop more robust methods for assessing savings and efficiency options.

NAO head Amyas Morse said the government was in danger of “sleepwalking into a centralised local authority financial system where the scope for local discretion is being slowly eroded”.

A MHCLG spokesman said parliament had last month approved a funding settlement that struck a balance between relieving growing pressure on local government and ensuring hard-pressed taxpayers did not face excessive bills.

“As part of this, we delivered a real terms increase in resources over the next two years, more freedom and fairness, and greater certainty to plan and secure value for money,” he said.

“We are currently working with councils to undertake a review of their needs and resources. Our consultation on this closes on Monday, and all responses will be considered as we look to devise a new funding system.”

The NAO report follows Northamptonshire County Council’s decision to issue a so-called Section 114 notice, restricting spending in the light of a looming inability to balance its budget, in a move blamed on funding cuts and increasing social care demands. Local government watchers took the announcement as a bellwether for upper tier and unitary councils, rather than an isolated case.

According to the NAO’s figures, while councils have striven to protect social-care spending it has still fallen by 3.0% since 2010-11. However, the figure compares with a 32.6% reduction in spending on all other service areas, including reductions of 52.8% on planning and development; 45.6% on housing services; 37.1% on highways and transport; and 34.9% on cultural services.